Law Lords Decision On Liability Of Statutory Successor Companies To Clean Up Historically Contaminated Land

In its decision in R (on the application of National Grid Gas plc) v Environment Agency (delivered on 27 June, 2007) the House of Lords has considered a number of important issues as regards present-day corporate responsibilities for acts of statutory predecessor businesses in respect of liabilities for historic land contamination.

The decision will be welcomed by many privatised utilities, but must still be treated with some caution. Its applicability in other contexts of land contamination by historic entities which have subsequently been nationalised and then privatised, and more generally in terms of successor liability, will need to be considered with care. In particular the case recognises that the language of other statutory transfers/transfer schemes does potentially create successor liability for contaminated land. The implications of the case are discussed further below.

The Legal Background

It has been clear since the enactment of the contaminated land provisions of Part IIA of the Environmental Protection Act 1990 that those who have caused or knowingly permitted contamination of land, and those who own land, may bear present remediation liabilities notwithstanding that polluting actions occurred prior to the enactment of Part IIA. But in the context where those companies may have been first nationalised and then privatised to what extent should present-day companies be regarded as heir to the liabilities of their predecessors?

At first instance, Forbes J held that National Grid Gas plc was responsible for the contaminating activities of predecessor gas companies, and so was an 'appropriate person', and treated as the polluter, for service of a remediation notice by the Environment Agency.

In its judgment of 27 June 2007 the House of Lords has overturned the decision of Forbes J, and has rejected the approach taken by the Environment Agency.

The Essential Facts

The proceedings arose out of land contamination discovered around a number of privately owned residential houses at Bawtry, near Doncaster. The houses had been built around 1966 on land upon which earlier a gas works had stood.

The evidence was that from the 19th century until 1912 the land was owned by Bawtry Gas Company, between 1912 and 1931 by the Bawtry and District Gas Company, from 1931 until 1948 by South Yorkshire and Derbyshire Gas Company, and by East Midlands Gas Board from gas nationalisation under the Gas Act 1948 until sale to a residential developer in...